Can this monumental mortgage foreclosure train wreck be salvaged?

Wake up and good morning. We may not have high-speed rail (yet), but the stop-the-foreclosure-fiasco bullet train is leaving the station. Suddenly, everybody's decided to recognize (or should I say confess) that the foreclosure legal process in Florida and increasingly in other states has fallen off the tracks, imperiling clear title home ownership in the country and endangering our economic recovery. We reported extensively about this in a St. Petersburg TimesSunday column here and in a follow-up Venture blog posting here on Monday.

The core of the issue? A foreclosure freeze is taking hold now that more people in power realize at least several banks were not checking the documents used to prove they owned the underlying mortgages -- and therefore couldn't prove they had the right to seize the home.

This issue is morphing so fast, it 's time for yet another update. Get used to this because this issue is only going to get more explosive the more things come to light. But on to today's news:

* Authorities in at least seven states -- that's Florida, Ohio, Connecticut, Texas, North Carolina, Iowa and Illinois -- are probing whether lenders used false documents and signatures to justify hundreds of thousands of foreclosures, and the number of these inquiries will grow, state officials and legal experts tell Bloomberg News in this story. "You’re going to see a tremendous amount of activity with all the AGs in the U.S.," says Ohio Attorney General Richard Cordray. "We have a high degree of skepticism that the corners that were cut are truly legal." The same story quotes Peter Henning, a law professor at Wayne State University in Detroit and a former federal prosecutor who worked on cases involving bank fraud, who says lenders, loan servicers and even title insurance companies are facing litigation on multiple fronts. "This is going to become a hydra. You’ve got so many potential avenues of liability. You don’t even know the parameters of this yet."

* Even Congress, a day late and a dollar short on this matter, is waking up and getting involved. According to this New York Times story, Washington lawmakers requested a federal investigation of bad conduct by mortgage lenders. House Speaker Nancy Pelosi and 30 other Democratic representatives from California told the Justice Department, the Federal Reserve and the Comptroller of the Currency (which regulates nationally chartered banks) that "it is time that banks are held accountable for their practices."

* Texas Attorney General Greg Abbott, a Republican, sent letters to 30 lenders demanding they stop foreclosures, evictions and the sale of foreclosed properties until they could provide assurances that they were proceeding legally. Here's the Dallas Morning News coverage.

* U.S. Rep. Ted Deutch, D-Fla., wants lawmakers to take a look at how the rights of homeowners may be compromised by accelerated foreclosure proceedings adopted by Florida and other states, the Fort Lauderdale Sun-Sentinel reports. In a letter to John Conyers, chairman of the House Judiciary Committee, Deutch says the "court system has failed these families, and it is the obligation of this Congress to find out why."

* Sen. Robert Menendez, D.-N.J., is demanding that more than 100 mortgage companies determine whether foreclosure documents they approved contain errors and reveal their findings. Menendez and Sen. Al Franken, D-Minn., asked Congress' investigative arm, the Government Accountability Office, to examine whether federal regulators overlooked problems at mortgage companies. They asked the GAO to recommend whether federal regulatory agencies should have more authority. (Ah, WashingtonThink: If regulators did overlook problems, let's reward their incompetence with more power?) Read more here.

* From the Jacksonville Times Union, we learn in this story that the role of an area company called Lender Processing Services Inc. in mortgage foreclosure wrongdoing is under investigation. The company, which works with law firms that sue homeowners who are behind on their mortgages. denies it did anything wrong. A company subsidiary, Alpharetta, Ga.-based Docx LLC, has been accused of falsifying documents used in foreclosure proceedings, and the U.S. Attorney's Office for the Middle District of Florida and the Florida Attorney General's Office are investigating those charges.

* Wells Fargo & Co. (which now owns Wachovia Bank) says it stands by the accuracy of foreclosure filings and won’t follow competitors in delaying seizures, after an employee testified he signed documents for proceedings without personally reviewing records. Reports Bloomberg News: The bank said it doesn’t plan to halt repossessions because its "procedures and daily auditing demonstrate that our foreclosure affidavits are accurate."

* Finally, leave it to the New York Postin this story headlined Houses of Horror to introduce the word "Zombies" into the mortgage foreclosure crisis. Says the Post: "The home foreclosure freeze implemented in recent days by several large banks will create as many as 40,000 zombie homeowners in New York state... Members of the zombie group, in various stages of fighting to keep their homes, would be thrown into a financial netherworld where they would not be making any mortgage payments, but would also not be evicted or pursued by their bank."

At some point, this piecemeal backlash will start to gel with broader recommendations on how to fix this dangerous mess. They won't be pretty. Somebody needs to crack some heads to insure we don't go down this rabbit hole again. But gee, that might require actual regulationand oversight.

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Tampa Bay business news and insights are brought to you each day by business columnist Robert Trigaux and his fellow business writers. Venture provides an inside look at Tampa Bay companies as well as events, people, deal, triumphs and failures across the Tampa Bay economy.